Preservation Institute Blog

Monday, October 13, 2008

Robert Solow On The No Growth Economy

Prof. Robert Solow, who won the Nobel Prize in Economics for his theory of economic growth, says that that capitalism can function in a slow-growth or no-growth economy, and that he does not know whether economic growth can continue, given current ecological constraints.

He is quoted in the current Harper's magazine:

As Solow said to me, “There is no reason at all why capitalism could not survive without slow or even no growth. I think it’s perfectly possible that economic growth cannot go on at its current rate forever.” This does not mean that productivity will cease to increase our quality of life; it means that people might find it increasingly costly to turn productivity into the kinds of things they are now accustomed to buying with their earnings. “It is possible,” says Solow, “that the United States and Europe will find that, as the decades go by, either continued growth will be too destructive to the environment and they are too dependent on scarce natural resources, or that they would rather use increasing productivity in the form of leisure. . . . There is nothing intrinsic in the system that says it cannot exist happily in a stationary state.”

This is important, because those of us who call for shorter work hours and slower growth often hear the objection that growth is essential to capitalism. In fact, most classical economists believed that capitalism was leading to a "stationary state." Only Marxists claimed that the end of growth would mean the end of capitalism, and they believed this as the result of ideology, not as the result of analysis.

Now that we are facing ecological constraints, such as resource limitations and global warming, mainstream economists like Solow are beginning to say once again that capitalism can survive without growth, as the classical economists did.